What is Lead Bank scheme?

Lead Bank scheme

The origin of The Lead Bank scheme can be traced to the committee headed by Professor D R Gadgil on the organisational Framework for implementation of social objectives which submitted its report in October 1969. This committee highlighted the fact that commercial banks did not have adequate branches in rural areas and also lacked the required rural orientation. Therefore this committee recommended the adoption of an Area approach to implement plans and programs for the development of an adequate banking and credit structure in the rural areas.

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A committee of banker on branch expansion program of public sector banks was appointed by the Reserve Bank of India under the chairmanship of Shri FKF Nariman. This committee proposed the idea of area approach in its report submitted in November 1969. This committee recommended that in order to enable the public sector banks to discharge their social responsibilities, each bank should concentrate on certain districts where it should act as a Lead Bank.

Based on this above recommendations, the Reserve Bank of India has introduced Lead Bank scheme in December 1969. This scheme aims at coordinating the activities of banks and other developmental Agencies through various meetings in order to achieve the objective of enhancing the flow of bank finance to priority sector and other sectors and promote banks role in overall development of the rural sector. For coordinating the activities in the district, a particular bank is assigned the lead Bank responsibility of the district. The Lead Bank is expected to assume leadership role for coordinating the efforts of the credit Institutions and government.

Keeping in view the several changes that have taken place in the financial sector, The Lead Bank scheme was last reviewed by the high level committee headed by Shrimati Usha Thorat the Deputy Governor of The Reserve Bank of India in 2009.

This high level committee held wide range discussions with different stakeholders including state governments, banks, development Institutions, academicians, NGOs, MFIs etc.  This committee also noted that the scheme has been useful in achieving its original objectives of improvement in branch expansion, deposit mobilisation and lending to the priority sectors especially in rural / semi urban areas. Based on the recommendations of this high level committee, guidelines were issued to, state level bankers committee, SLBC convener banks and lead banks for implementation.

The lead banks were advised to ensure that private sector banks are more closely involved in the implementation of The Lead Bank scheme envisaging the greater role for private sector banks. The private sector banks should involve themselves more actively by leveraging on information technology, bringing in the expertise in strategic planning. They should also involve themselves in the preparation as well as implementation of district credit plan.

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